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Brian Jacobsen

A potpourri of potential issues

AdvantageVoice® Blog—7-3-13
Brian Jacobsen, Ph.D., CFA, CFP®, Chief Portfolio Strategist

U.S. investors once again find themselves following news on both sides of the Atlantic. In Egypt, President Mohammed Morsi proposed early parliamentary elections and a power-sharing arrangement to avoid being forced out of office by protestors and the military. In Portugal, another cabinet minister resigned. This jeopardizes the disbursement of further bailout funds to the indebted nation, as it may presage an unwinding of the loosely-knit coalition government.

On the positive side, U.S. initial unemployment claims fell to 343,000 for the week that ended June 29, and the four-week moving average was 345,500. Additionally, last night, the Obama administration said it would delay the enforcement of the employer mandate portion of the Affordable Care Act until January 2015. To the extent the requirement that employers of 50 or more full-time equivalent employees were holding back hiring to avoid facing a penalty, this decision should be a welcome reprieve.

In the U.S., the manufacturing and nonmanufacturing sectors seem to be moving to the beats of different drummers. While both are growing, the patterns and outlooks for growth differ. The nonmanufacturing sector seems to be keeping a slightly more steady rhythm than the manufacturing sector.

The difference in rhythm is reflected in the recently released Institute for Supply Management’s (ISM’s) Nonmanufacturing Index and the ISM Manufacturing Index. Nonmanufacturing is expanding, while manufacturing is contracting slightly. Manufacturing contributes 13% to U.S. gross domestic product but only makes up 8.8% of nonfarm payrolls. So, when it comes to overall economic activity, the nonmanufacturing sector seems to be the one to keep an eye on.

The problems in Egypt and Portugal look like potentially temporary issues that should stay contained. The slowly improving U.S. economy should keep the U.S. a relatively favored place for investors. 

The views expressed are as of 7-3-13 and are those of Chief Portfolio Strategist Brian Jacobsen, Ph.D., CFA, CFP®, and Wells Fargo Funds Management, LLC. The information and statistics in this report have been obtained from sources we believe to be reliable but are not guaranteed by us to be accurate or complete. Any and all earnings, projections, and estimates assume certain conditions and industry developments, which are subject to change. The opinions stated are those of the author and are not intended to be used as investment advice. The views and any forward-looking statements are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund. Wells Fargo Funds Management, LLC, disclaims any obligation to publicly update or revise any views expressed or forward-looking statements.

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